If your business has been hit hard by the economy’s downturn, then you’re in a position that many other business owners have been in before. You may be worried about collections attempts, concerned that you’ll need to let go of your employees or frustrated that you might have to shut down.
Chapter 11 bankruptcy can help. This form of bankruptcy is one that allows you to restructure your debts and keep your doors open. While some downsizing may need to occur, this type of bankruptcy may give you the best opportunity to keep your business open and retain your employees.
How does Chapter 11 bankruptcy help a business?
Chapter 11 bankruptcy is also known as reorganization bankruptcy. With this form of bankruptcy, the goal is to reorganize your debts, alter contracts and find a way to keep your business open with the goal of being profitable upon emerging from bankruptcy.
This is the most complex form of bankruptcy, so it’s important to work closely with a bankruptcy attorney if you decide that you want to consider it. There may be alternatives to try before filing for bankruptcy, which is something your attorney can discuss with you.
Most businesses that enter into Chapter 11 bankruptcy do continue to operate. You’ll be able to continue bringing in that income, and then you can use it to repay debts. Debts are restructured in a way that allows you to repay them more effectively, which helps your business become profitable.
Why would creditors agree to change the terms of debt repayment?
Creditors are likely to agree to change the terms of debt repayment because keeping your business open will help you repay more of what you owe. If creditors aren’t flexible and there is a chance that your business could close, they’d have more to lose if Chapter 7 was filed instead.
Your attorney can walk you through the bankruptcy options. If you want to keep your business open and operational, then Chapter 11 bankruptcy may be the option that you want to pursue. Other options are available if you plan to close or would like to try alternatives prior to bankruptcy.